Gensource Potash Corporation (GSP.L)
LSE - LSE Delayed price. Currency in GBp (0.01 GBP)
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Still down from when I bought but this is encouraging!!
Nobody panic here. We have known for a long, long time that GSP was going to need to pony up some meaningful equity for this project. Even if they had to come up with the full amount today (I suspect they might not have to - - and will be able to provide it in tranches over the next 2 years), that would mean around 250mm shares issued at 20 cents CAD / 15 cents USD. That would leave us with a share count of around 630mm shares for a CAD$200mm ownership stake of the CAD$400mm Tugaske project, aka 32 cents per share. And that would be replacement value, which I project to be a fairly low mutiple of after tax earnings (maybe 10x) once this mine is up and producing, not to mention any expansion / other partner potential, both of which I believe are in GSP's future. In other words, even with full dilution today, a Tugaske Module 1 alone valued at 20x earnings could put the company CAD$0.60/share.
As for who will come up with the equity money, GSP has stated there are numerous institutions interested in equity stakes in GSP. I don't believe one of them is HELM. And I doubt there will be an offering to the general public.
I suppose the tepid response today is not due to the SPV, which I think is a terrific structure for GSP to get started with on their first module. Instead, we may be lagging a bit today as it appears we may have to wait a bit longer for German government approval "at one of its next regular meetings" and for "full construction in 2021." Looks to me like we may be pushing project kickoff from late 2020 to early 2021.
For those who have been here for many years, these sorts of delays have been part and parcel of getting us closer to the finish line. A more honest name for the company might be Gensource Patience Corporation. But so far, that patience has been well rewarded....and I believe there may be substantially greater rewards still ahead.
Here we go!
(1) Do they have a date when they will be starting construction? No.
(2) What is the Value of the company vs say a $IPI? Not exactly apples to apples, so probably best to value GSP based on the economics of building and running the Tugaske mine. Currently at today's low, low share price around CAD 20 cents, I figure it's trading at around 1x EBITDA once the mine is producing at 500k tons per year. An absolute steal here.
(3) Do they have a patent that separates them from other Potash companies with the 70% water savings? To some extent, yes, with the Innovare acquisition. But their real advantage is based on a well thought out, repeatable, partnering, fast to market, environmentally approved, direct distribution, environmentally optimal, modular approach from a proven team. It's a grown up, robust model that took many years to put together, and the partners were strategically selected to rinse and repeat for each additional module.
(4) So they are not even producing Potash? Correct. Give it 2 years. Of course, by then, you will have to pay much, much more for the stock.
(5) When do they begin production? 2 years, if all goes well.
(6) How do you perceive the latest acquisition of Innovare? It's a good thing. Gensource plans to use their technology over and over again, so it will save them money ultimately and secure the intellectual property for the future.